Treasury yields face a key test of 4.8%, and a sustained move above that level could create “significant issues” for other asset classes, according to Matt Maley, chief market strategist at Miller Tabak + Co. “We remain concerned about the Treasury market… as rising fiscal deficits, massive debt issuance and heavy corporate borrowing continue to pressure long-term yields… while criticism from the Treasury Department has failed to produce desired drop in rates (at least so far),” Maley said in a published note. Maley said recent efforts by the U.S. Treasury Department and Secretary Scott Bessent to lower yields have so far failed to generate the desired response. The effort came when investors were deeply short Treasuries and summer trading conditions were relatively weak, and policymakers hoped that a verbal intervention could trigger a significant bond rally. Instead, the episode underscores the growing difficulty of addressing market concerns without addressing underlying fiscal pressures, he noted. It is increasingly difficult for investors to ignore the US budget deficit and national debt, which currently exceeds $40 trillion, as the government competes with large volumes of corporate debt for investor demand. More than $8.4 trillion in U.S. government securities are scheduled to be renewed between now and the end of the year, while September could be a record month for high-quality corporate issuance, according to Maley. Goldman Sachs recently revised its 2026 investment-grade dollar issuance forecast upward to $2.3 trillion. The pressure is not limited to the U.S. Japan, the U.K., France and other developed economies face significant fiscal challenges, adding to a broader shift in global bond markets as investors demand greater compensation for absorbing government debt. “None of this means the bond market will move in a straight line,” Maley said, noting that the bearish sentiment and stretched positioning could still trigger a strong rally in Treasury futures. Any such move, however, could prove tactical rather than marking a long-term trend reversal. The 5% level has been widely watched for the long end of the Treasury curve, but Maley said market thresholds have risen repeatedly, from 4.4% to 4.5%, 4.6% and 4.7%. A sustained break above 4.8% could have repercussions far beyond bonds. Michael Chen, general manager at Noah ARK Hong Kong, said a disorderly rise in long-term Treasury yields could trigger a revaluation of assets that rely on long-term cash flows, including ultra-long duration bonds, high-valuation growth stocks, commercial real estate and some private assets. Chen said structural pressure on Treasuries was increasing as fiscal dominance pushes investors to demand greater risk compensation for holding long-term debt. It prefers gold and hard currencies as a structural hedge and is underweight ultra-long duration Treasuries, while maintaining exposure to quality equities, real assets and AI-related physical infrastructure such as electricity, power grids, energy storage and data centers. HSBC has also become more cautious about long-term bonds in developed markets. The bank raised its late-2026 forecast for the 10-year Treasury yield to 4.65% from 4.30%, citing a higher structural floor under long-term yields and a more aggressive spread of potential monetary policy outcomes. HSBC said it remains cautious on long-dated bonds in developed markets, while raising its end-2026 forecast for 10-year German Bund yields to 3% from 2.8%. For Maley, the key problem is that any short-term decline in yields would not necessarily solve the long-term problem. “If we have a bounce in the Treasury market soon (and therefore a drop in yields)… and even if it may last until the midterm elections… it is not something that can be smoothed out in the long term… without some serious changes on the fiscal front,” he said.
